Don’t be lulled into a false sense of security, consider this when choosing your future franchise
Franchising allows you to be in business for yourself, but not by yourself, with most franchisors offering tried and tested methodologies for setting up your own business.
The above statement is true, yet franchising can sometimes be misinterpreted as a ‘silver bullet’ to business ownership. While there are many advantages to owning a franchise, don’t be lulled into a false sense of security.
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Although you are using your franchisor’s methodology, resources and training as a ‘platform for launch’, owning a franchise still takes a lot of hard work and dedication from the new franchisee to ensure the long-term success of their business. Before you start, here are five things you may want to consider when choosing your future franchise:
1. Decide what your mid- to long-term goals are
Although this may seem like a strange place to start when looking to invest in a franchise, having a clear understanding of what these goals look like and knowing this at the outset could help you make strategic and informed decisions about your choice of franchise. At the start of any business, franchised or otherwise, your time will be consumed by setting up your premises, employing, training and managing teams, and targeting customers.
But as your business moves out of the start-up and growth stages into maturity, how do you want your time to be spent? If having a work-life balance is key, consider business to business franchises. Do you want to pass your business on to future generations? Or do you want to own your franchise for a short period and sell for a profit?
Whatever your goal is, be sure to ask your franchisor about exit strategies and ensure you understand the length of the franchise agreement and its stipulations before signing up as a franchisee.
2. Consider if your franchise will always be relevant
Consider the longevity of the product or service you plan to sell. Ask yourself the question: will this still be desirable in five years’ time?
Franchising covers a whole host of industries and while any one of those industries could experience a boom period, with customers flocking through your doors, there could come a time when people may not need your product or service. How easy will it be to go back to basics and actively sell your product and service if there is a downturn in the market?
At FASTSIGNS, we offer a diverse range of products and services and focus on testing new signage trends, equipment and substrates to ensure that if one particular type of signage slips out of vogue, we have new and exciting products hitting the market every year. This dedication to research and development ensures we continue to cater to changing customer tastes and remain relevant.
3. Be clear on your sums
Many new franchisee’s catalyst for choosing to own their own business is their desire to build something for themselves. Some franchisors capitalise on this dream, making it feel attainable by only divulging their initial investment costs. It’s highly likely there will be additional costs, which franchisors should outline clearly to you once you are past the initial enquiry stage.
Depending on the sector you choose to enter, additional costs could include set-up fees, rents, rates, start-up equipment and opening stock requirements, training and marketing costs, legal fees, telecoms and vehicles.
It’s important you understand your set-up costs, so you can calculate your break-even point. If you decide to proceed with your chosen franchise, you’ll be able to project how long it will take to reach this point and begin making a profit.
A good franchisor should be able to provide you with an accurate breakdown of these costs in an easily digestible and transparent manner. For these fees, you’ll receive a defined territory, access to funding, economies of scale when purchasing equipment, recommended machinery, tried and tested marketing materials and a reputable brand name that customers are more likely to purchase from you than if you were to set up your business as a brand new entity.
4. Do your due diligence
While all franchisors are keen to complete deals with new franchisees, they should be confident enough in their offering to actively encourage you to speak to their stakeholders, including their current franchisees and even their competitors.
Once you understand the franchisor’s offering, speak to some of its existing franchisees - these people once stood in your shoes. Take this opportunity to tap into this font of knowledge, understand the challenges as perceived by the franchisee and ask how the franchisor helped them to overcome these challenges.
You should also take the opportunity to explore the industry. Franchised businesses that operate in the same sector and sell similar products will have unique selling points - these could be product based or integral to the structure of the franchise model. It could be that their offering is more suited to your needs.
Other places you could look to assure yourself of your potential franchisor’s viability is Companies House, where you can review its success rate. Also, see if the franchisor is registered with any of its industry’s accredited bodies. FASTSIGNS is accredited by the British Franchise Association for franchising and the British Sign and Graphics Association for the signage industry.
5. Be willing and able to learn
When you launch your franchise, no franchisor should expect you to know everything, no matter how comprehensive its training programmes and onboarding processes are.
If you follow its prescribed model, use the resources available, ask questions, talk to your support team, engage with your network and undertake additional training you’ll get to grips with your franchised business quickly.
The author
John Davies is managing director of FASTSIGNS.
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